Consumer Driven Agriculture
Agriculture has changed dramatically in recent years with the introduction of new technologies, better genetics and improved management just to name a few trends. But another very basic change that has occurred in a more subtle fashion is the fact that agriculture is becoming more and more driven by changes in consumer lifestyles and preferences.
A recent Economic Research Service (USDA) study identified several broad demographic trends shaping food markets, including an aging population, higher standards of living, and more diversity of our population. Let's look at each of these in more detail with some implications for agriculture.
First, the U.S. is experiencing the aging of the so-called "baby-boomers." This group of people were born between 1946 and 1964 and comprise the largest single category of U.S. consumers. So what does this trend mean for agriculture. First, the "baby-boomers" will be more health conscious suggesting that consumption of foods that are higher in fats, fried, red meat, poultry, cheese, and sugar will slow. On the other hand, the demand for fish, fruits and vegetables (fresh and processed) will likely increase.
A second basic demographic trend is that the U.S. market is maturing. Most people in this country are generally well fed so we'll not likely see the average person eat more. In fact an aging population tends to eat less total food. But a more affluent society suggests consumers more willing to purchase more expensive cuts of meats, exotic vegetables, more pre-prepared foods and eat in higher priced restaurants. The average consumer in the U.S. today spend less than 10% of their take home pay on food. So this maturing market implies that Americans will demand higher quality foods, not more pounds of food (quantity).
A third major trend is that the U.S. population is increasing but becoming more diverse. One indicator of this trend is the fact that Hispanics now comprise the largest minority group in the U.S. with about 13% of the population today out of a total U.S. population of 281 million (2000 Census). But a more diverse population again implies more eating of fruits, nuts, seeds, eggs and fish while dairy product consumption growth may slow. In many states, including Kentucky, the rapid growth in goat consumption has been fueled by large increases in the number of Hispanics.
Food manufacturers and distributors recognize that meeting consumer demand means adopting new ways of doing business such as accepting closer links with various contractual arrangements and using technology to enhance the quality of products. These business strategies and links to technology are becoming the new hallmarks of a consumer driven agriculture. Increasingly production strategies will play to these trends and includes such things as diversifying into high quality or specialty crops to meet the changing market, more branded products that are linked to a particular company or even individual farm.
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For additional information, please contact, Larry Jones.